Case Study - 3M• FIDO - First In defeats others• Make a little sell a little• Hire local
EMCExport Management CompanyExport Managementwho act Export Specialist Company as the marketing department for client firms
Export Strategy• Hire EMC• Focus on one market• Enter on small scale• Added time & resources• Build relationships• Hire local• Seek opportunities to learn• Consider local production
Trust Ship Goods Send PaymentExporter Importer What happens first? Shipment or payment?
Three InstrumentsLetter of Credit - L/CBill of Exchange - DraftBill of Lading
Financing2. Bank promises Letter of Credit 1. Importer obtainsexporter to pay on LC bank’s promise to payimporter’s behalf 0.5% to 2% on importer’s behalfExporter Bank Importer 3. Exporter ships to 4. Bank pays the 5. Bank gives the bank exporter good to the importer 6. Importer pays the bank Loan to extend payment
AdvantagesMay not trust each other but do trust a reputable bank
Bill of Exchange Draft DraftAn order written by an exporter instructing the importer, or importer’s agent, to pay the specified amount of money at a specified time.
Parties to the DraftMaker - ExporterDrawee - Who the draft ispresented to (Bank)
Exporter Importer2. Exporter agrees to fill order 1. Importer orders goods6. Goods shipped to Saudi 3. Importer arranges letter of credit7. Exporter presents draft to bank 13. Importer agrees to pay bank in 90 days11. Exporter sells acceptance draft to bank at discount Importer Exporter Bank Bank5. U.S. bank informs exporter of L/C 4. Saudi bank send L/C to U.S. Bank8. U.S. bank presents draft and bill of lading to Saudi bank 9. Saudi bank accepts draft and returns to U.S. bank10. U.S. bank informs Exporter of acceptance 12. Saudi bank informs importer of arrival of documents.14. U.S. bank collects payment from Saudi bank in 90 days